Hi Tim, personally I'm really never an advocate of taking from retirement funds. Once you dip in one time, it gets easier to dip in a second time. With that being said, borrowing is much better than taking a withdraw, but have you explored other options like a heloc on your personal residence?
I would take out a spreadsheet and simply do the math, what would your net worth look like taking the loan and buying the property vs letting it sit and grow. More than likely the rental properties will win out because you are leveraging that 10%, but without actual numbers its hard to say. Hope this helps.
I actually took out a loan against my 401k about a year ago for the down payment on my house hack. I could have paid with my cash but I wanted the extra liquidity when I couldn't get an FHA and had to go conventional and put 5% down instead of just 3.5%. As that was my first home purchase the extra cash gave me comfort if/when something unexpected came up. My loan was for 11k and I still owe about 7k.
The risk is if you lose your job/leave then you'll have to pay it back fairly quickly before facing penalties. I guess you just have to ask yourself:
How do I feel about my job?
Could I pay this off if I lost my job?
If I wanted to leave my job for another one could I pay it back?
How good of a deal do I have on my hands?
I wouldn't hesitate myself. As long as you are doing everything correctly and buying right, you should make way more than the 4% that is will cost. There are variables, but it is a great way to access capital that you otherwise wouldn't be able to get.
good option ….* if getting traditional loan for the purchase - the lender wont need to include a payment on the 401K loan in qualifying rations * you will need to provide 401K terms of withdrawal and paper trail of the loan as part of the loan process ( which normally isn't an issue )
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